Telstra has announced a new restructuring strategy that involves simplifying its operations, cutting its workforce, reducing its cost base and establishing a standalone infrastructure business.
The strategy – codenamed ‘Telstra2022’ – outlines four pillars, one of which is to create wholly owned standalone infrastructure business unit with its own CEO, effective July 1.
The business unit, called Telstra InfraCo will comprise Telstra’s fixed network infrastructure including data centers, domestic fiber (excluding anything mobile-related), copper, HFC, international subsea cables, exchanges, poles, ducts and pipes. Its services will be sold back to to Telstra, as well as wholesale customers and NBN Co.
Telstra InfraCo will also include Telstra’s NBN Co co commercial works activities and Telstra Wholesale, with a total workforce of approximately 3,000. Telstra says the new business unit will control assets with a book value of about A$11 billion and have annual revenues and EBITDA of about A$5.5 billion and A$3 billion respectively.
“As technology innovation is increasingly relying on connectivity, the role of telecommunications infrastructure is becoming more important. There is virtually no technological innovation happening today that does not rely on a high quality, reliable, safe and secure telecommunications network,” said Telstra CEO Andrew Penn. “In this world our infrastructure assets are becoming more valuable. By creating a new infrastructure focused business unit we will better optimise and manage these assets.”
Penn said the new infrastructure business unit will provide more flexibility and transparency in the management of Telstra’s underlying infrastructure, as well as reinforce the discipline with which capital allocation occurs across the group.
The Telstra2022 strategy also includes the creation of the Telstra Global Business Services group, which will serve as a point of consolidation for all large-scale “back of house” processes and functions using technology to reduce costs for large repeatable functions.
The implementation of Telstra Global Business Services combined with accelerated simplification of processes, moving to more agile ways of working and product simplification is expected to lead to an overall reduction in labor costs of around 30% – and a net reduction of 8,000 employees and contractors over the next three years, including removing one in four executive and middle management roles to flatten the structure.
Meanwhile, as part of its cost reduction program, Telstra said it intends to monetize assets of up to A$2 billion over the next two years. It also aims to reduce underlying core fixed costs by A$2.5 billion by FY2022. Key drivers to hit those targets include simplifying its product set, phasing out legacy products and systems, migrating customers to new products, further digitizing sales and service channels and improving procurement practices.
Lengthy details of the Telstra2022 plan are here.